When the Department of Financial Services made its annual announcement about health insurance price increases last week, it neglected to mention one thing: how much the prices were increasing.

The department’s press release spelled out in detail how much it had rolled back the hikes requested by health plans – and how much consumers would supposedly save as a result – but never gave the bottom-line impact on rates for 2024.

For that basic information, it was necessary to follow a link to a separate chart.

Here is what the department chose not to say: 

Next year’s state-regulated premiums are going up by an average of 12 percent for individual plans and 7 percent for small groups. Those increases are roughly four times and two times the current rate of inflation, respectively.

They translate to about $720 million in additional costs for 1.1 million affected consumers and their employers, or about $650 per person, in a state that already pays some of the highest premiums in the country.

Leaving that unpleasant news out of a press release doesn’t make it any less true.

Both the underlying facts and the department’s evasiveness point to a deeper problem: The state’s regulatory system for health premiums, known as “prior approval,” is failing as a strategy to control costs.

Although the rate hikes approved by DFS are generally much smaller than what the plans request, they can still be substantial. This year’s approved increases for individual plans ranged from a weighted average of 3 percent for small group customers of UnitedHealthcare to 25 percent for individual policyholders at Emblem (also known as HIP) and Independent Health Benefits Corp.

When weighted by the membership of each plan, the average premium increase for individual plans in 2024 will be 12.4 percent, or about four times the rate of inflation, and the average increase for small groups will be 7.4 percent, or about double the rate of inflation.

This round of hikes is not particularly unusual. Over the past 10 years, the average annual increase has been almost 9 percent for individual plans and 7 percent for small groups.

The prior approval regime applies primarily to individual policies and small groups plans (defined as 100 employees or less) which together cover 1.1 million New Yorkers or about one-tenth of the commercially insured market. Most large employers are self-insured and exempt from state regulation under federal law, meaning prior approval has no direct effect on the bulk of health coverage costs.

Still, prior approval does not appear to be effectively controlling costs even for the portion of the market it regulates.

As reported last month on this blog, New York’s average cost for employer-sponsored coverage for a single employee in 2022 was the highest of any state and 18 percent above the national average.

According to the same federal survey, New York’s price disparity has been consistently wider for the small groups subject to prior approval than it is for large groups which are exempt.

Over the past three years, premiums for groups of 50 or fewer in New York averaged 22 percent higher than the nationwide norm, while the gap for groups of 1,000 or more was 12 percent (see chart).

 

This makes clear – contrary to the DFS's spin – that the prior approval process is not "saving" money for consumers in the long run, but allowing costs to continue their upward spiral.

If state officials truly want affordable health care, they should focus less on the symptom of premiums than on the underlying drivers of medical costs – which in New York include heavy taxation, inefficient regulation, a lack of transparency in hospital pricing and increased consolidation among medical providers.

 

About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

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